Politics, Business and Vested Interests in China: Kjeld Erik Brødsgaard helds a conference at the “L'Orientale” University

Politics, Business and Vested Interests in China: Kjeld Erik Brødsgaard helds a conference at the “L'Orientale” University

China politics and economics today: “This iron triangle of Party, State and Business interests is the heart of the beast”

April, 5th 2013, Palazzo del Mediterraneo, University of Naples “L'Orientale” – The conference begins with Paola Paderni briefly introducing Kjeld Erik Brødsgaard, professor in the field of governance and economical politics of China, research fellow and Director of Asia Research Centre of Copenhagen Business School. Before focusing on the topic of the talk, professor Brødsgaard tells few words about Naples – “one of my favourite cities” – showing a kind attitude toward the students: “You're welcome to interrupt me at any time, for questions or comments... I don't mind being interrupted”.
The title of the conference points out to the relationship between politics and business in China. First of all, it is necessary to draw the attention on the perspective adopted. Since there are several approaches to the study of Chinese politics, in Brødsgaard's study many models have been taken into account: totalitarianism, clientelism, tendency analysis, interest group politics, bureaucratic politics, political culture, corporatism, fragmented authoritarianism. The scholar introduces his notion of “integrated fragmentation” perspective: since China is fragmented in various ways – bureaucracies, institutions, political actors, etc. – but it is also integrated in a unified political order, he chooses to talk about such integrated fragmentation. Brødsgaard's methodology is based on a prosopographical study of chinese business elites in order to reconstruct a “life, career and networks” database of the leadership of the top 117 chinese SOEs (State-Owned Enterprises). Moreover, he aims at positioning this approach in a broader study of chinese business groups based on Western and Chinese language material, as well as on interviews with Chinese top business leaders. After showing several data about national companies – in China there are 117 zhongyang qiye, 'central enterprises', within strategic sectors – Brødsgaard underlies how China, today, is trying not to downsize but to develop them into global giants.
In 1981, in China there were 100 ministerial level working departments and 8 machine building industries, ministries within the power and energy (electricity, coal mining, petroleum, metallurgy) and several commissions as well. This situation resulted in a bloated bureaucracy. During the reform period two measures were taken: the reduction of ministries and commissions (from 100 to 61) and the transfer of functions to enterprises. Between 1981 and 2008 the Organs of the Central Government became 27 and ministries turned into three companies: China National Offshore Company (1982), China Petrochemical Corporation (1983) and China National Petroleum Corporation (1988), and similar processes went on in other sectors. Thus, the industries reorganization during the 1990s caused the remaining of 2/3 of the dominant players in each sector: the business groups turned powerful and autonomous in terms of business operations, making huge profits which they did not pass onto the state.
As Brødsgaard underlies, in 2003, in order to bring control on these companies SASAC (State-owned Assets Supervision and Administration Commission of the State Council) was create, a commission being charged with exercising authority over the business groups; however it was not authorized to receive dividends and to appoint leaders of the largest companies which were ranked at ministerial/vice-ministerial level. The business groups had turned in small kingdoms. Control over the public sector was obtained through the Nomenklatura system: a list of positions the Party controls through direct appointment or recommendation, managed by the Central Organization Department. Such list contained around 4000 positions including government ministers, provincial leaders, heads of the most prestigious academic institutions and heads of the most 53 important companies. The 53 companies not managed by SASAC and managed by the Central Organization Department are the new Nomenklatura companies in strategic sectors such as electricity, nuclear engineering and construction, aerospace science and technology corporation, aviation industries, shipbuilding and so on. One way of controlling is rotation: cadres have a term of maximum 10 years and many of them have previously served in enterprise and have a business background. In fact, 52 of China's governors and vice-governors have previously worked in Chinese big business and the opposite trend is true the same. That's why Brødsgaard introduces the term pantouflage, a “shuffling across” between politics and economics.
But, even if SOEs are so powerful, since they are based on huge government support, if you carefully look at the profit you can acknowledge it is not a real one: according to Unirule, the State supports the SOEs by access to land a very low prices, unpaid rent for nationally owned resources such as oil, gas, and coal, cheap loan, fiscal advantages, and so on. Comparing the data about real and nominal profits, it seems clear that there is an illusion of profit.
Pointing out at the conclusions of his conference, after such a picture, Brødsgaard asks: why not reform? Because there are strong vested interests: the elite has access to highly paid jobs in the SOE sector, SOE leaders enjoy high salaries and very informal bureaucratic ranking and also a method of recruitment and promotion. As Brødsgaard has defined it, “this iron triangle of Party-State-Business interests is the heart of the beast” for many reasons: it blocks further reforms, it is a source of corruption and a source of cash in which there are entire family networks involved and, in such a situation, corruption seems to be one of the most problematic issues since the large business are integrated in the political power system.
The debate which followed the conference was very interesting and several students took part at it, even if very young – most of them being at the first year of the Bachelor degree. Among these, one was particularly touching: a chinese student took the floor in order to thank professor Brødsgaard for having portrayed so a detailed picture about her own country, a chance that would have not been so easy to get if she was a student in China.